After 100 days in power, Modi govt has done little to curtail FPI outflows

The benchmark indices rallied sharply after May 20, when exit polls predicted the return of the Narendra Modi-led NDA government. Stocks continued to climb after the final results, which showed Modi getting the biggest mandate in 30 years. 

Investors cheered the verdict, expecting the economy and corporate earnings to benefit from political stability and continuation in policy making. Days after the new government was sworn in on May 30, the indices climbed to all-time highs — with the Sensex soaring past 40,000 and the Nifty piercing the 12,000-mark. 

Since then, it has been largely downhill, with the Nifty coming off nearly 10 per cent from its highs and the mid- and small-cap indices falling even more. Lower-than-expected GDP growth, weak corporate earnings, and a disappointing Budget have been key factors. Further, unsupportive global markets have added to investors' woes. 

The turmoil in global markets stems from the US-China trade war and rising fear of recession. FPIs have pulled out nearly Rs 30,000 crore from domestic markets since the Modi government returned to power, spooked by the increase in tax surcharge, as well as the lack of stimulus or big bang reforms.  

Last month, the Centre rolled back the additional surcharge and announced a slew of measures to boost business and investor sentiment. However, it has done little to curtail the FPI outflows. The signal from the market to the government after the first 100 days is — ‘The going is getting tough’.